Morocco’s government adopted a bill to regulate Islamic banks and sukuk issues, said the country’s communication minister. (File photo: Reuters)

Morocco’s government on Thursday adopted a bill regulating Islamic banks and sukuk issues after months of delays, paving the way for a final vote by the parliament of the North African kingdom later this year.

Approval of the law will be the last step before establishing full-fledged Islamic banks in Morocco, be they subsidiaries of Moroccan banks or foreign rivals, a measure which may bring more Gulf Arab investment into the country.

Morocco has been seeking to develop Islamic finance for about two years, partly as a way to attract Gulf money and fund a huge budget deficit. But the sensitivity of the Moroccan political elite to Islamism has repeatedly delayed its plans.

Last year, Moroccan deputies approved legislation allowing the government to issue sovereign sukuk, but it has not yet taken steps to raise its first Islamic bonds.

“We have adopted that law today and we are sending to the parliament,” communication minister and government spokesman Mustapha Khalfi told Reuters by telephone.

The minister said it was difficult to estimate how much time parliament would need, but experts expect it will vote before the end of this year.

Morocco’s central bank has started talks with a body of Islamic scholars on establishing a central sharia board to oversee the country’s fledgling Islamic finance industry, an official from Moroccan central bank told Reuters in April.

The board, composed of scholars and financial experts, would rule on whether instruments and activities complied with sharia principles.

Islamic banks will be called participative banks under the Moroccan legislation.

In 2010, Morocco began allowing conventional banks to offer a limited set of Islamic financial services, which obey principles such as a ban on the payment of interest.

The country’s Islamic finance drive accelerated after a moderate Islamist-led government took power through elections in late 2011, and as the Moroccan economy has been hit by the euro zone debt crisis.